ACCC drafts price cut for regional broadband

Telstra will be forced to drop the price it charges rivals like iiNet and TPG to provide internet access in regional and rural Australia under new measures announced by the Australian Competition and Consumer Commission.

But industry executives and analysts say the draft measures released on Tuesday would not necessarily result in a price cut for consumers.

The long-awaited measures, which come a year after the ACCC said it would set regulated pricing, would require the country’s largest telco to drop the price it charges rivals to provide internet services in regional and rural areas by 3.4 per cent.

But the pricing measures would also allow Telstra to slightly increase other charges related to providing regional internet access, a move which the company’s rivals say may rule out significant changes to retail pricing for customers.

The directions allow Telstra and its retail rivals to commercially negotiate access to its copper network, but sets a benchmark that Telstra’s retail competitors can fall back on.

The draft pricing would last until the end of the 2014 financial year, before which the watchdog plans to release permanent pricing changes.

The measures have been long-awaited by Telstra’s rivals, who largely rely on the company’s infrastructure to provide internet access in areas where it is too expensive to install their own.

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He said a significant change in the prices offered by
Telstra
would “change the market quite a bit - ourselves certainly - but others like TPG and Optus, using that as an opportunity to bring competition in those areas".

But iiNet chief regulatory officer Steve Dalby said on Tuesday that the watchdog’s determination was disappointing and unclear on whether they would allow Telstra to continue “double-dipping" on its copper network.

“That is not the outcome we expected and doesn’t give consumers any hope for an improvement on the competitive front," he told The Australian Financial Review.

“Given that there is always the possibility of changes coming through in the final [measures], we won’t be looking at retail pricing for some time."

A Telstra spokesman said the company was working through the determination but that it appeared the ACCC had “largely retained the balance of charges across access and usage set out in the Interim Access Determination".

“It’s pretty clear that Telstra was charging a lot more than the prices that we’re talking about now," he said. “There’s no question that has involved big reductions.

“Clearly Telstra is the dominant supplier in regional Australia now, it was uncompetitive prior to us declaring this service in most areas. There’s no question in my mind that the whole process we’ve gone through will see more competition for regional Australia."

However, the measures would still require that regional Australians buy an active phone connection alongside their broadband service, which could push up monthly internet bills by as much as $30 per month.

Wholesale broadband services account for approximately 16 per cent of the total $2.1 billion Telstra makes annually from reselling access to its copper network.

The company has pushed back heavily on any changes to the existing market, warning in a submission to the watchdog that any errors in regulatory change would have “large, far-reaching and observable distortions to social outcomes".